Earnings call transcript Q3 2023

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Operator

Good morning, and welcome to the Griffon Corporation Fiscal Third Quarter 2023 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will an opportunity to ask questions. [Operator Instructions]. Please note that this event is being recorded.

to conference like Harris, to now CFO. would turn over the Brian I go Please ahead.

Brian Harris

Good With Executive morning, call Debbie. you, Thank everyone. Kramer, Chairman is me our and Chief Officer. Ron the on

recorded and which of our Our call in is will available The are earlier for issued release be press detail playback. today. being

based environments past, of Griffon's views our the forward-looking in in our they will include statements and on the about As comments the which operate. company's performance businesses

can inherent today's to Exchange the risks in subject change are that the in as changes. uncertainties statements our statements press see Please Such Commission filings. and world and and various cautionary Securities release

included adjust between our some today's items press in These Finally, items reconciliations that explained for reporting remarks in periods. affect comparability will release. are of non-GAAP those our

the over turn I'll Ron. call to Now,

Ron Kramer

Good us. thanks morning, and everyone, Brian. for Thanks, joining

As financial see Griffon's third performance quarter continues you results, from expectations. exceed can our to

performance or see Home in results the our and were to continues of which Products, outstanding Building year-over-year volume. segment, by driven commercial Our growth "HBP"

Residential two levels price normalized. to for commercial performance in in volume lead years sales and development activity innovation reduced to due and productivity supported following residential HBP continues products marketing growth. all elevated and by long and HBP invest as channels. is and business backlog backlog year-over-year of times. mix across favorable increased to and further both had drive investment as expected decrease HBP's

expectations. for the performance raised fundamentally has Clopay bar

challenging Turning conditions. to the Consumer CPPs to Product Professional market continue segment, results reflect

reduced All and elevated channels demand customer consumer levels. by and were inventory affected geographies

the its organizational that and market. product tools, market these lines, to wood to include handling in U.S. long-handled announced U.S. are and certain last storage global quarter conditions strategy of we impact As sold manufactured lines and sourcing the CPP currently product is expanding material on address

a off an global and customers U.S. remains on global project model. is solid a schedule better asset-light serve The sourcing structure, operations within sourcing and with to utilizing flexible start CPP's to and be positioned will more budget. cost-effective By

streams significant We'll detail around been in there's work suppliers. and higher on closures profile November. earnings more plan Specifically, our year-end call ramping progress up on our provide

Turning allocation. capital to

During enhance dividend to included a to our it to $X.XXX to actions that authorization $XXX program million. we the total shareholder increase our XX% quarterly raising million a that and regular repurchase quarter, to share brought the announced $XXX increase value

August Board authorized dividend Griffon the quarterly XXth payable to $X.XXX initiated XXXX consecutive the at an marks which today, XXXX. share compound grown to XX.X% XXth, dividend Earlier rate on of in since on has per XX. the shareholders annualized of we September This record shareholders, dividends

authorization. shares million repurchase an During per share. this share approximately $XX million of average quarter, remained At we $XXX at under repurchased our X.X% the price outstanding of for or XXth, X.X $XX.XX shares June million

between share We we continue active to and with significant a believe disconnect and and price there remain will the of Griffon our intrinsic value is repurchases. businesses, share opportunistic our

expect now to Turning are We for to on adjusted of performance our quarter, year. $XXX our we expectations at quarter to previous for million and our EBITDA be million. raising full segment year Based our the guidance least third compared again the $XXX guidance fourth guidance.

both has demonstrate our guidance actions value our these as the to to well immediate strategic shareholders. XXXX Griffon's allocation In long-term as the in outlook, raise and board fiscal and and reflects capital confidence summary, plan management commitment and enhancing our

to update. for I'll the turn Brian over it financial

Brian Harris

quarter, the margin $XXX continuing in and of points. comparison EBITDA start Ron. with consolidated by basis increase by by Thank before Revenue of unallocated on performance a adjusted XX% both million, an of XXX decreased quarter year prior million increased amounts of basis. you, third our to I'll discussing $XXX XX.X%, a X%,

in million the million in quarter for to $XXX quarter, increasing points period, affect $XXX by on quarter, was XXX items prior comparability profit basis from gross over year the to excluding profit a quarter, XX.X%. prior current year Gross basis gross the $XXX margin increased compared and the current GAAP prior was that X% million the

expenses selling, GAAP the million $XXX million quarter in general were Third and compared $XXX administrative year. to prior

items adjusting periods, XX.X% million expenses general year selling, and representing million, Excluding administrative both revenue. XX.X% prior of compared to $XXX were of revenue from or $XXX the of

continuing or compared Third per period to from million quarter income was $X.XX million share. share income of the $X.XX $XX GAAP prior or per operations $XX

that continuing share year share. Excluding per compared or income prior from adjusted from comparability at per both net all the $XX periods, million current to million was affect $X.XX $X.XX items operations or quarter $XX

Corporate in and million to the quarter year. compared million unallocated expenses $XX prior excluding the depreciation $XX.X in were

items excluding adjusted XX.X% Our XX.X% rate year-to-date the tax normalized for the and for quarter was effective period.

the were totaled compared prior $XX.X capital expenditures million in the $X the quarter. third and amortization $XX.X $XX to prior Net the Depreciation year. in in million quarter year third quarter to million million compared for

Products mix revenue Building X% commercial products. the labor reduced driven year and quarter, Regarding partially quarter, and residential costs by commercial increased and increased costs for decreased increased prior and performance, segment by volume the residential EBITDA year and material Home favorable advertising Adjusted our by driven both for offset for volume, reduced over offset partially prior pricing to marketing. XX%, by compared

all inventory soft is from in primarily customer revenue and in Products volume to diversification the elevated geographies U.S. the decreased demand and year. levels consumer Professional across and customer prior reduced XX% and supplier driven The channels Consumer reduction attributable revenue by

overhead on the partially were Hunter and related from to performance. Fan primarily manufacturing decreased and reduced year improved the due and XX%, EBITDA unfavorable by by discretionary volume items spending reduced offset adjusted impact These of its CPP revenue absorption. prior impact and

service is manufactured expect. on the industry-leading leveraging products, strengthening expanding distribution release positioning, continue market Xrd, and we announced evolving to sourcing our for earnings its in CPP customers address an quarter that that second May consumers model to our U.S. competitive conditions, enabled sold In asset-light providing products utilizing global strategy CPP its and and high-quality and

continue by project margin quarter position the related incurred CPP the EBITDA been the strategy. XX, end million have pre-tax and to in the expect global generate $X.X target actions to of completed our additional There Further, substantial XX% expected and calendar achieve cash we to to changes value shareholders. XXXX. charges no CPP expansion of sourcing In ended to of charges June of be its these

on net leverage covenants, the September at previous of of end. compared our X.X of and times debt and X.X billion calculated had fiscal to year and XX, leverage in billion debt and $X.X debt net $X.X June Regarding of sheet times liquidity, debt leverage quarter X.X XXXX as balance net net debt billion as times, to of XXXX, based and we our $X.X EBITDA

special in to want we stock quarter, May in returning neutral leverage quarter. $XX over million prior I shareholder course remain and dividend even that after in highlight the of third essentially the relative million buybacks capital via the $XXX to

$XXX process segment expectations the guidance, strong trends unallocated fourth costs and financial This full date from our $XXX adjusted review to related year $XX previous guidance million, current the are approximately million. our for given our of continue guidance Regarding of strategic to million, to through EBITDA to charges of million EBITDA $XX guidance the excludes for performance year XXXX our segment quarter, we raising

and AMES charges. global sourcing expansion

million guidance free $XX including million to revenue amortization for versus $XX million, In $XXX prior. of and exceed be XX%. guidance a $XX $X.X approximately prior billion, capital to cash tax addition, million XXXX, interest now net normalized unchanged we be of expense and Other of of expect versus to $XX expenditures flow depreciation remains $XX income, of rate million million,

to over I'll Ron. the call turn back Now,

Ron Kramer

Brian. Thanks,

credit I questions, to $XXX August million turn XXXX its size from revolving this of Griffon want amended of we Before it announced the maturity of morning, March to and the XXXX. to that million to facility facility increase that and extended $XXX restated highlight to from

facility us closing provide and credit of with operating support enhance requirements flexibility grow shareholder to and and company further us working continues will The our financial our value. positions new our capital that to

I Also, that brands the and of because product, them businesses categories. remain to to in demonstrate. the customer leaders and industry-leading effort highly levels want service, It's teams and of maintain quality, after continue we our and and our management their sought employees commitment acknowledge are of

Home for by for business well historically remodel Our and the and from continues segment the and sees Building demand repair products driven perform market. commercial and to residential Product healthy our resilient long-term tailwinds

the market environment We consumer prospects the and Consumer to cost by about realize XX% for our Product remain excited is and rationalizing current addressing Professional leveraging our of its EBITDA structure sourcing segment. CPP capability Globally, margins. goal global its

strategic in Griffon's management plan. very remain Board and outlook our and confident

year operating to will is value long-term deliver our free impressive continue believe strong come. businesses shareholders. with our yet we cash best flow to to its to Even and use date, performance of the We to to continue the results our

Operator will any questions. take

Operator

one one assemble roster. will session. [Operator answer your begin We time, that At follow-up. question please we this to our We will and and limit to momentarily questions you now the Instructions] ask question pause

The first Securities. question Labick Bob with Please go ahead. is from CJS

Lee Jagoda

Hi, It's Bob morning. Jagoda Lee good morning. this actually for

Brian Harris

Good morning, Lee.

Ron Kramer

morning, Good Lee.

Lee Jagoda

Good morning.

start we to with synergies the follow-up the dealer to business about across as that potential maybe see talk and just you in network? Clopay and residential the existing talk the integrating And commercial business. Door's the commercial visibility can about demand progress a So, then maybe and

Brian Harris

Sure.

good as continue as far So, commercial to demand. expect visibility, we

be CornellCookson benefited future. historical has have ongoing that use and will been dealers Clopay very and We product foreseeable greatly sectional converting to commercial, by successful for

expect we difficult have was high of more comps year. that a during half to going unit And we period the prior this we On the -- forward, period, marketing XXXX, lost as while in have until side, the improve get through have of residential market fiscal to we first invested we recapture sales because standpoint, had historical share the backlog. backlog the partially orders from we

Lee Jagoda

any the your side, global that global you're push your the U.S. then implement -- trying how And towards from the are to existing initiatives sourcing maybe U.S.? infrastructure that Got initial sourcing? does -- the it. benefit on in there And findings global how sourcing CPP does

Brian Harris

Sure.

we early November. the so in this but far, we're in being more we you as expected. So as see update successful We'll process,

begin far already and converting. that that we're and supplier lines developing with U.S. the regarding sourcing, that have to leveraging our that partially U.K. we And already As -- network U.S. Australia product capability we're source, the to supplier in for we as use the to source with. network

Brian Harris

Operator?

Ron Kramer

question, Operator, please. next

Operator

The Wojs from me. with Baird. ahead. is question Please Excuse next go Tim

Brian Harris

Tim?

Tim Wojs

business. HBP the on just Maybe

seeing pricing. you're that? just guess, out or next seeing, maybe worry of you I So, what HBP? curious, needs there? And that anything kind mix some level you're you that to to look at of in I pricing about kind on talk how we the side, there a there's back materials to think give raw think as I'm the just pricing respond And what year, industry could of

Brian Harris

Sure.

materials, as going far will dictate how market mostly as the occurs forward. raw So that

just So, of your questions sort backwards. I'm with going

line with market. in priced As far are the as pricing, we

We continue mix. to good expect

forward, go strength pricing we with residential and coming As up regarding our business. the products refer And products, in our margins innovative commercial year to both side. new the we're constantly I to-date of

Ron Kramer

I'll Tim, premium just taking ourselves And network, and add worries to market and Ron. product, best and no the it. the see its the premium about service, share have have pricing. market We're we dealer we leader

Tim Wojs

Okay.

then in think were Home this quarters. down, really are maybe Very margin just, to more you and look last longer in actually you the bit outline you range. favorable. of steel at down, Products XX% And and Okay. good. well just, the XX% inputs I quarter I margins still MDI and operating And high targets the business Building is mid some and But sort that at at other last look couple

I'd walk margins difference anything about, I should higher? I'm through there? think that you thinking differently can maybe because And think -- So I even of that have just me almost maybe there's if kind there skilled to anything, to, I just, if if guess, the move

Brian Harris

future, pressure the happen that we potentially a that and very a and as Currently, visible the considers margin little view as in We well. what conservative So, posted business being seeing nothing considering but those, the the is outlook just could on is far were long-term cycle. we is yet. perhaps doing margins and aren't

Operator

Company. and Please is next ahead. Romero from question go Julio Sidoti The with

Julio Romero

Thanks. Great. morning. Good

on a the and earlier converting piggyback to dealers. CornellCookson HBP wanted lease You about question

pushback mentioned You that? and guys common successful Could a conversions. those common kind with Maybe or on from us of that dealers do a little you've you rebuttal you how been overcome those bit? expand give what's

Brian Harris

the it's Sure. It's actually, opposite.

lining We converted. to up have dealers be

they should to We we them high of that are customers service provide we've our at new make on being level sure other in that and dealers. thoughtful to able a that service bringing expect been

the is systems our this and matter So, thoughtfully sure one-by-one. a sure dealers carefully are really Training, of converting making working. they products, making understand

has successful. And been so far

be we'll expected, successful. We continue to

Julio Romero

That's for very What And previously? with into strategy global you sourcing significant it. turn suppliers do lead global the Got sourcing progress helpful. ramping the then you've mentioned, times strategy. seen on to CPP, on compared up

Brian Harris

centers sourcing I assume, you distribution our getting wherever we're mean things from into from.

Julio Romero

Exactly.

Brian Harris

a serviced we they've But the in inventory will ensuring the understand Those that be roughly to lead used been timely order's we times we'll at we level a make customers a get And take sell calculus [ph], to basis. in way hand will because we to we good currently and on XX% with that what change. dealing XX% B, U.S., A, service to our source in in are have, the have be before. timing it'll so product that to that we of sure our

Operator

ahead. question The and Grooms from Please go Stephens next Trey is with Company.

Noah Merkousko

Trey. on Merkousko Noah is This morning. for Good

Ron Kramer

Good morning.

Noah Merkousko

gears Morning. Maybe CPP. to here switching over

I to there, you've consumer. weak mean, know a outlook demand there the on be out, I continues called Just

remain globally looking when inventories like as that right for any about you kind expectations forward believe channel there Sounds Again pretty the we and the of segment? high. might think just be thus? in demand inventories And

Brian Harris

Sure.

We're other I are such factors looking We It's as to -- XXXX at weather XXXX hard calculus. -- expect of talking most think take from it quarters. But is to normalize similar change could when to most a to going multiple the locations. exactly we know there's look inventory to that time. going XXXX. it's most standpoint And consumer take product to for

Ron Kramer

be there will a long view designer, recovery the XXXX manufacturer, will is we company XX% EBITDA out Yes. will have and those sorcerer year. the run and the believe efficient beyond And products this for we more there, target that a we be positioning and the fiscal achieve

Noah Merkousko

there top? mentioned, you're the leader. HBP in Got the on Can help it. players and you is maybe you looks a business, that just market market are you How That like? Maybe now. And mentioned, many more the like? quantify makes Then help could looks share marketing how concentrated sense. structure you what us what investing market if regaining understand and at

Brian Harris

Sure.

four that market there's So make the approximately. as of large as XX% market about far players the up

So pretty level. consolidated that at

were the yes, customers to that not a of wait, as wanted some provide wanted was faster we not to understandably to far able increased if products. while marketing, so our other they backlog, had we As necessarily the wanting they it a providers. door That than of went matter other

can demand weeks. that our So two typically meet in customers now backlogs approximately are we our normalized,

products regaining that investment are the to helpful. market know them about our share and in marketing capability We people to and being is let those our new products timely provide

Operator

is question go Raymond Sam next ahead. The Darkatsh with from James. Please

Sam Darkatsh

Ron. How are you? morning morning Good Brian. Good

Ron Kramer

How you Sam? well. Doing are

Sam Darkatsh

I'm terrific. Thank you.

been of my and most questions answered. Just have asked

inquiries. follow-ups on a of Just prior couple

the the pre-pandemic? sense of CornellCookson's bit the with I looks versus trying doors get talk think business? we talk door a sustainability is what could margin today overall HBP a an HBP. garage to little a lot But just there you more about garage specific about profitability level, where versus that versus like And

Brian Harris

Sure.

residential balance and Clopay It varies purchase knew lot there. there was those $XXX mentioned on a approximately commercial margins stronger on and similar when they're X% sectional Currently Integrating revenue. but There contributed we to million of of -- take to balance our of I'll the lot we conversion our margins. with you work we products, are dealers much back was have product, had I opportunity CornellCookson. by to business. of So get our to commercial a all to a on that business It similar.

Ron Kramer

nice very business And to believe commercial continue. and we continue going to in growth that's the see that

Sam Darkatsh

doors, don't of CornellCookson follow-up the garage similar figure, of do ever are be you that off is think a cut in yet. mean, question, commodity-sensitive you'd to our sustainability me pricing. this cut with this margins bit doors? garage a doors might steel to price my rolling the never But So there's I so not been knowledge more little but resi

of sensitivity sense how give with sustainability you the compare us contrast versus resi? and commercial could So a or you margin

Brian Harris

a different model. Yes. a bit There are of

with -- and dealers on I'll full jobs done. products at side one time those So, and the services, you're suite to out bidding commercial where it's get a a going with job call of

and get in by product only our after doors, full the there to getting jobs. is gives properly itself on time, products it quality capability are quality -- though but sold them purchasing, those them a installed So a edge it's not of build having leading who those excellent to suite of us get and that

time and bid. one So at a are it's those more

So adjust the capability each overall pricing strength. may us bid gives goes. as our But

Sam Darkatsh

question. actual then, follow-up my And here's

seeing I pricing a this moderated that's in around last fine So, stack both and looks two-year earlier was tuning sequentially price that bit what on HBP. Now pricing the like you're HBP perspectively quarter? from quarter Tim for asking is mix. it a in guess little what

sure So, degradation HBP stack? sequentially? not, in are that's price might But a softest actually two-year bit if like-for-like. pressure I'm little And on of not what you seeing the the explain if or price

Brian Harris

Yes.

of to more So There's really be remain it's mix price price stable. and a I commercial the to mix that, to talking the on of but the relatively commercial, good. the consideration way forgot What always about. higher products is products element part has that, you're remained continues By stable. what was than as I less back have of labor much year-over-year component residential seeing mention pricing mix

Operator

Gabelli is next [Operator Justin Funds. Bergner go question Please Instructions] with ahead. from The

Justin Bergner

morning Ron. Good Brian. morning Good Nice quarter.

Brian Harris

Thank Good morning. you.

Ron Kramer

Justin. Thanks

Justin Bergner

noticed number million trying $XX to regarding two? statement, purchase was the repurchases. And close really then It clarification Any other Hunter I clarification question question up. those there's there? just XX%. quarter shares the were a strong and reconcile was comment part one of the think the but flow two I then to margins One follow just treasury this for cash like just in million, so $XX

Brian Harris

Sure.

On the could that when difference vest. affect there I repurchases they the of the believe -- vesting of netting between number. that elements vestings be repurchases, shares that's true [ph] some and

margins, significant generally the freight there. costs On stronger generally Hunter Last -- times with the driver year, that last -- burden year the year. not major is of year seasonal Hunter we this is the QX and the QX did have was

Justin Bergner

Okay.

that level, that or of something helped is this of sort this quarter? them So high mean, sort margins there unusual I those sustainable XXs

Brian Harris

are of period this not those year margins abnormal. For

business. Over the or entire give take you're talking XX% year plus, margin

Justin Bergner

out follow-up my for a business, are looking Got through just maybe warehouse a to the industrial you. that of sectional market sort innings this or of weakening pick up talking CornellCookson or come commercial for the quarter HBP middle you or you're demand. more on the in And Clopay are you would companies space say you then, related And two? the in about innings? dealers some early dealer Are seeing later switch

Brian Harris

in middle We're No. innings for the switch. the

the in far as to our see strong for As we are products space. demand demand continuing

Operator

This closing the over I back concludes would question Kramer conference for the to and session. remarks. the turn like Ron answer to any

Ron Kramer

Thank we speaking November. you. in look you Well, forward to to

Operator

Thank The now attending for concluded. you presentation. conference is today's

disconnect. now may You

Griffon (GFF) 2 Aug 232023 Q3 Earnings call transcript